Superior Essay Writers | Capital allocation

Capital allocation

Part 1:
Explain the concept of asset allocation and the two-fund theorem, by describing the procedure to
find the optimal capital allocation line in a market with two risky assets and the risk-free asset. Make
sure you pay attention to:
▪ The steps required to build the portfolios
▪ The combination with the risk-free rate
▪ What are the possibilities of leveraging-deleveraging on the capital allocation line
This is a theory question, no Excel needed. Write the answer in Section 1 of the report.
If you want, you can help yourself with graphs to clarify your answers.
Part 2 (Excel):
Now assume you want to invest in a market with two risky assets and the risk-free rate. The numbers
are in the below table:
Risky
Asset 1
Risky
Asset 2
Risk-free
Asset
?(?) 12.50% 7.50% 1.25%
? 25.50% 15.50%
?12 0.65
It is possible to choose from eight different portfolios of risky assets, with weights:
Weight
(Risky Asset 1)
Weight
(Risky Asset 2)
Portfolio 1 -20% 120%
Portfolio 2 0% 100%
Portfolio 3 20% 80%
Portfolio 4 40% 60%
Portfolio 5 60% 40%
Portfolio 6 80% 20%
Portfolio 7 100% 0%
Portfolio 8 120% -20%
Show how it is possible to select the best risky portfolio, given the information you have.
Solve this part by doing the calculations on the Excel file and write the answer in Section 2 of the
report, with comments.
If you want, you can help yourself with graphs (Excel screenshots) to clarify your answers.
For this part you also have to submit the Excel file.
MBA53048, Portfolio Management
Individual Assignment (MSM Kuwait, February 2021)
Instructor and Examiner: Angelo Corelli 3
Part 3:
Explain how it is possible to measure the performance of a portfolio (fund) based on the features of
the portfolio itself. How many tools you know for it? Answer by addressing the following points:
▪ Explain the differences between the tools
▪ Clearly indicate which tool is better to use for measuring the performance relative to the
benchmark.
▪ Clearly indicate which tool is better to use for measuring the consistency of the performance.
This is a theory question, no Excel needed. Write the answer in Section 3 of the report.
Part 4 (Excel):
Consider now a market where three funds can be traded, and you want to understand which is the
best investment for you, based on all the performance measurement tools learned in class.
The numbers are:
?(?) ? Beta Tracking Error
Fund 1 10.50% 16.50% 0.10 18.00%
Fund 2 16.50% 23.50% 1.10 21.00%
Fund 3 35.50% 32.00% 0.50 22.50%
Index 15.00% 18.50%
Risk-free 1.25%
Write the solution in Section 4 of the report and answer the following questions as well:
▪ Which fund(s) outperform the benchmark (index)?
▪ Which portfolio offers the highest compensation for risk?
▪ Which fund has the most consistent performance over time?

Sample Solution

ter on, one of the most known methods will be discussed in a detailed way. The facial recognition methods that can be used, all have a different approach. Some are more frequently used for facial recognition algorithms than others. The use of a method also depends on the needed applications. For instance, surveillance applications may best be served by capturing face images by means of a video camera while image database investigations may require static intensity images taken by a standard camera. Some other applications, such as access to top security domains, may even necessitate the forgoing of the nonintrusive quality of face recognition by requiring the user to stand in front of a 3D scanner or an infrared sensor[15]. Consequently, there can be concluded that there can be made a division of three groups of face recognition techniques, depending on the wanted type of data results, i.e. methods that compare images, methods that look at data from video cameras and methods that deal with other sensory data, like 3D pictures or infrared imagery. All of them can be used in different ways, to prevent crime from happening or recurring. ii. How do these technologies work? As listed above, there exists a long list of methods and algorithms that can be used for facial recognition. Four of them are used frequently and are most known in the literature, i.e. Eigenface Method, Correlation Method, Fisherface Method and the Linear Subspaces Method. But how do these facial recognition work? Because of word limitations, only one of those four facial recognition techniques, i.e The Eigenface Method, will be discussed. Hopefully this will give an general idea of how facial recognition works and can be used. One of the major difficulties of facial recognition, is that you have to cope with the fact that a person’s appearance may change, such that the two images that are being compared differentiate too much from each other. Also environmental changes in pictures, like lightning, have to be taken into account, in order to have successful facial recognition. Thus from a picture of a face, as well as from a live face, some yet more abstract visual representation must be established which can mediate recognition despite the fact that in real life the same face will hardl>

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